Demand and Supply Curves: Rotations Versus Shifts
7 Pages Posted: 29 Apr 2003
Date Written: March 2003
The observations we makes are fairly simple, although many teachers of economics may be unfamiliar with them: 1) If the demand relationship is assumed to be "constant elasticity" (the double logarithm specification), a change in a demand-shifting variable (e.g. income) will result in a rotation of the demand curve and not a parallel shift, while 2) If the demand relationship is assumed to be linear in its arguments, a change in a demand-shifting variable will result in a parallel shift in the demand curve. The clarification is of interest, in part, because virtually all graphs in principles, intermediate microeconomics, and other textbooks in the various field areas are drawn as parallel shifts, implicitly assuming a linear relation.
JEL Classification: A2
Suggested Citation: Suggested Citation